Teller’s Polygon-based platform lets users make a deposit and take out a loan to buy Ethereum NFTs.
Buy now, pay later
Even after falling prices during the ongoing bear market, a Bored Ape Yacht Club NFT still costs over $104,000. The decentralized loan protocol Counter came up with a workaround to make this look a little less daunting:
Buy a ‘blue chip’ NFT now and pay later
Teller’s new feature is similar to that of startups like Affirm and Klarna. There are, however, some important differences. It is currently only available for a small number of NFT projects. In addition, the funds are provided by potential lenders who offer liquidity through the platform.
The service, called Ape Now, Pay Later, runs on Ethereum scaling platform Polygon. Ryan Berkun, founder and CEO at Teller Finance, says the platform is helping to fill a need in the market. It allows potential buyers to access more expensive NFT assets by paying over time.
Buying NFTs is one of the things Web3 consumers want to do right now. Buy now, pay later is a no-brainer.
– According to Berkun.
How does it work?
It goes like this. For example, if a user wants a Bored Ape Yacht Club NFT that is on the OpenSea marketplace, they can use Teller’s platform to indicate that they want to buy that asset. The user has to make a down payment of no less than 50%, depending on the project. The platform then tries to match the candidate with a lender.
If the match is successful and a lender accepts the terms, the deposit will be pooled with the rest of the lender’s funds. The NFT is purchased from OpenSea and placed in a wallet during the redemption cycle. If all payments are made on time, the borrower will receive the purchased NFT from the wallet.
Rising NFT Market
An NFT is a blockchain token that is used to prove ownership of an item. They are used for artwork, profile photos, entry passes and tickets. The NFT market rose to a trading volume of $25 billion in 2021. It has already recorded about $20 billion in trade this year.
Supported Ethereum NFT projects include the Bored Ape Yacht Club and Mutant Ape Yacht Club. Moonbirds, Doodles, Cool Cats, Azuki, Meebits, Adidas Originals: Into the Metaverse, RTFKT-MNLTH, and Murakami Flowers Seed are also participating.
For the Adidas NFTs the lowest deposit is required, it is only 25% of the cost. The RTFKT-MNLTH and Murakami are each at 33%. For all other ‘blue chip’ collections, a minimum deposit of 50% is required.
Berkun said the rates were chosen based on factors such as market liquidity and volatility. For example, the Adidas NFTs are in fact interchangeable, as they all look the same and provide the holders with the same functionality. On the other hand, each Bored Ape or Doodle is unique.
New NFT infrastructure
Teller’s service is part of an emerging wave of NFT-centric financial infrastructure, including lending platforms such as NFTfi and Arcade. Those platforms allow NFT owners to take out cryptocurrency loans by using their NFTs as collateral.
Teller’s platform, on the other hand, facilitates the purchase of NFTs through loans, but it is not the only one. Cyan is another crypto startup that offers a buy now, pay later feature for financing NFT purchases. It recently raised funding from Animoca Brands and OpenSea.
There are, of course, risks involved. The NFT market is known for its volatility and lenders take the gamble that a particular NFT project could fall in value significantly over the life of the loan. But if the buyer doesn’t repay the loan, the lender can claim the NFT and try to sell it to recoup the losses.
Such a platform can also abuse this. For example, if someone has inside information about a major announcement around an NFT collection that they believe will increase in value, they can take advantage of a loan at the current price. This way, the potential buyer is ahead of the expected price increase.
The new feature in the future
Berkun suggested that the crypto and NFT industry should consider these possible scenarios. He pointed to the situation with former OpenSea CEO Nate Chastain. He profited from buying and selling NFTs using privileged information. Chastain is now being charged. Berkun said the following about this:
“This is a really important question that we as an industry need to ask ourselves. How can these products be manipulated? At the moment we don’t have some sort of ethos in this industry to restrict those with inside information from not buying NFT. Protection mechanisms will have to be built around this. This type of financing is similar to buying a product with a credit card. The measure should stop the insider, not the platform itself.”
Berkun believes the feature will become all the more useful as NFT use cases expand. Things like music NFTs, virtual land in metaverse games, and even NFTs that represent real-life real estate are increasingly emerging.
This is the core of the infrastructure where Web3 goes. Especially when we start thinking about the intersection of WiFi and the NFT world.